Why the Residential Mentality is Changing
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It seems like every day we see a never-ending tendency to see housing prices go up. Many people that are looking to buy their first house have shared their experience with us, and it led us to reflect on the current market direction and how it will be in the future.
Nowadays, in a pandemic world, we have realized that our homes need to amount to much more than a simple place where we sleep and spend little to no time in our day-to-day lives. With companies pushing work from home, societal work culture has suffered a genuine overhaul. The result? Our desk is now our dining table, the couch is our lounge, and our kitchen is a meetings room.
However, property appreciation hasn't stopped going up, albeit rent prices suffering a bit of a blow due to the ongoing event. By operating in real estate for so long we've always had a passion for predicting future trends, and now is very much the best time to do it – objectively. Before coronavirus, the most common mentality of acquiring a home in Portugal (as well as in many other countries) often revolved around the length of the "golden triangle". This triangle is comprised of 3 of the most important elements for homebuyers: location of the house, the workplace and the kids' school. This may sound a bit unrealistic at first but when you narrow it down to the key factors that play a role on where you wish to live, you'll see yourself calculating how far apart these commutes are – because inevitably, you'll have to do them. The ideal scenario is to find a place where these are all close together and still fulfil each and every one of your necessities.
This is one of the main reasons why location has always been so expensive and even more so why it will never get cheaper. By realizing this reality, people faced 2 different alternatives: opting to live a little farther from major city centers or, on the other hand, be willing to spend more for something that is basically close to everything. Now, when you picture the current scenario where the concept of workplaces has dramatically changed, this variable is subject to a deeper reflection when acquiring a house. Do you really need to be 15 minutes away from work when you attend the office a maximum of 2/3 days per week? Many people have wondered this for the last 6 months. The result? People are approaching real estate with a more objective and down-to-earth approach.
It's obviously hard to generalize the mentality of the average homebuyer in Portugal, but in our experience, Portuguese people tend to value micro-location a lot. For example, it's hard to overcome certain stereotypes associated with a particular city, even when they do not represent an actual reality. 20 years ago Lisbon was seen as the primmest place to live – because it was the capital and therefore it would give you a tremendous status and feeling of accomplishment. Nowadays, people tend to appreciate peripheries more and more, for the simple fact that they gather qualities that the main CBD cannot provide. In reality, there is no "best place" to live. Where you truly feel well in, at a given time in your life, is what matters the most.
This cultural profile has also suffered changes with the pandemic. The Portuguese people are realizing the potential of other spectacular cities to live outside Lisbon and Porto. People are looking at properties with a much direct approach. Last week, one of our long-time clients had a chat with us regarding his plans to live in Vila Franca de Xira, a city near Lisbon: - "I've been contemplating investing in Vila Franca de Xira for nearly two weeks. It just sort of started coming to my senses how good that place actually is. We're talking about a consolidated city that isn't yet saturated, plenty of land to build, a prime riverside view, very affordable sqm prices and above all else, it's 20 minutes away from Lisbon. It even has a train if you wish to travel faster!".
When the mindset changes, the market changes accordingly. Daryl Fairweather, Chief Economist of world-renowned technology-powered real estate brokerage Redfin, stands firm with his predictions: «When the pandemic ends, many people will continue working from home at least part-time, but they will begin taking their lunch and coffee breaks outside their home. This means the kinds of businesses that cater to workers will relocate to suburban areas where more of their customers will be during the day. For example, Starbucks is closing stores in urban areas while opening new stores in the suburbs, and small businesses in cities are recovering at a slower pace than small businesses in the suburbs. Over time, suburban communities will start to feel like more cities with more new restaurants, coffee shops, and happy hour spots opening. Homes in the suburbs could become even more desirable, thanks to an increase in amenities. The value of a home is closely tied to what amenities are close by, and in the future, more suburbs could have it all—schools, parks, restaurants, coffee shops, and bars.»
We believe that right now is a crucial time to be paying special attention to places that have arguably been neglected, such as close suburbs. These will ultimately grow in popularity and as the priorities of homebuyers are changing, we need to think more about what we really appreciate in a property.